Liddick: Playing the blame game with mismanaged projects
March 26, 2013
Colorado’s Public Utility Commission got it half right. Finally. Maybe. Because with Xcel, the search for more money is never really over.
On Thursday last, the PUC voted 3-0 to deny Xcel’s request to raise consumer electric rates to recoup the last $16.6 million it lost on its SmartGridCity project in Boulder. It’s a shame that the commission didn’t apply the same logic in 2010, when it decided that all Colorado ratepayers should reimburse the bulk of the cost for Xcel’s failed project, but half a loaf is better than none.
For those who have spent the past few years practicing their Zombie Apocalypse Hiding Skills, SmartGridCity was supposed to be the nation’s first comprehensive installation of a “smart grid,” which – theoretically – uses new technology and software to allow ultraprecise monitoring and control of residential electricity use. It was geekalicious! Cutting edge! It would save the planet from demon CO2! Wash your car while you drive home!
Okay, I made that last bit up. But given all the real hoopla, it would have been hard to tell.
SmartGridCity began in 2008 with a budget of $100 million – $15 million financed by Xcel and the remainder paid by seven partner organizations with various interests in the technology involved. The original goal was to -install thousands of sensors and smart meters on 35,000 homes, connect them to monitoring and control systems, and…presto: savings, both monetary and planetary.
Costs immediately ballooned; within a year, Xcel’s portion had trebled to over $44 million. Partners dropped out, taking their money with them. The project was pared back; at first, to a plan calling for about 1,850 “in-home” energy management systems as part of a pilot project. In the end 101 systems were finished before the project was put out of its misery. All that was left was the finger-pointing.
Xcel blamed its partners; Boulder blamed Xcel, calling SmartGridCity a “failed experiment,” and saying, in part, that Xcel “…must not be allowed to play fast and loose…with ratepayers’ money.” Yes, Boulder actually said that. Colorado’s Office of Consumer Counsel noted the project appeared to have been comprehensively mismanaged.
In the end, a supine PUC allowed Xcel to recoup nearly $30 million by shaking down its Colorado customers, despite the utility’s promise on initiating the project that it would “not cost ratepayers a dime.” Perhaps our rebate checks are in the mail.
But our favorite utility’s attempt to stick its customers with the remaining $16.6 million bill for its failure was evidently a grab too far for the current PUC. After an Administrative Law Judge ruled in January that Xcel had failed to demonstrate any of the promised benefits from the project the utility appealed to the full commission, evidently hoping for more of that 2010 magic. Its appeal was rejected “with prejudice,” meaning there’s no appeal. Except through the courts, which Xcel is contemplating as you read this.
What are the lessons in the Xcel greed-o-rama? Let’s start with the easy stuff: blowing oodles of money to achieve smaller than minimal results is easy when it’s not your wallet being emptied. It doesn’t really matter how harebrained your scheme is if you have millions of captive pockets to pick; that applies equally to monopolistic competitors like Xcel, and governments. Think Solyndra. Abound Solar. The Volt. SmartGridCity. You bought ’em all, whether you wanted to or not.
Also, good intentions are no substitute for a sound business plan. The latter is usually improved if the planner has his or her own money in the game; that keeps the focus on developing things that people will actually buy because they are bigger, smarter, faster, cheaper or just plain better than the status quo. Ford’s automobile, Edison’s light bulb, Westinghouse’s electric motors – they were created because there was a market for them, not to make the world a better place. They all certainly did that, but it wasn’t the primary objective of their creators. Sales-driven profit was.
This is not to say that private industry doesn’t have SmartGridCities of its own. From Edison’s obsession with direct current power to the Edsel and New Coke, the history of our country is littered with business flops. The difference is, when the Corvair nosedived, Chevrolet took its lumps. Nowadays, the first recourse is to taxpayers – or in Xcel’s case, utility customers, who must subsidize failure no matter how outlandish.
Remember: what you subsidize, you get more of.